U.S. Payrolls Probably Fell, Posing Risk to Spending

U.S. Payrolls Probably Fell, Posing Risk to Spending

Sept. 4 (Bloomberg) -- Employers in the U.S. probably cut another 230,000 jobs in August, and the jobless rate increased, underscoring threats to consumer spending, economists said before a report today.

The unemployment rate rose to 9.5 percent from 9.4 percent, according to the median of 77 estimates in a Bloomberg News survey. The projected drop in payrolls would be the smallest since August 2008, and follow a 247,000 July decline.

Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy. AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s.

“Given that we expect only modest economic growth in the initial phase of the recovery, it might not be until the second half of next year until payroll growth really begins to ramp up,” said Joseph Brusuelas, a director at Moody’s Economy.com in West Chester, Pennsylvania. “Job cuts will need to slow further if spending is to avoid steep declines.”

Today’s report, scheduled for 8:30 a.m. in Washington, comes hours before Geithner meets in London with finance ministers and central bankers from the Group of 20 emerging and developed nations.

‘Long Way’

While the G-20 gathering will discuss how policy makers plan to exit from their fiscal and monetary stimulus efforts, now isn’t the time to start pulling back, Geithner told reporters in Washington this week. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”

Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions.

Economists’ payroll forecasts ranged from declines of 100,000 to 365,000. Job losses peaked at 741,000 in January, the most since 1949.

The August projection would bring total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump.

Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent for all of next year.

Job Cuts

Announcements of staff reductions continued last month. Whirlpool, the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.

Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put 244 more on involuntary leave as part of the 1,600 job cuts it announced in June.

“If you have workers that aren’t taking home paychecks or taking home small paychecks, that means consumption’s going to be seriously constrained and that’s going to be a real damper on overall growth,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “We are talking about a very weak recovery because at the end of the day, consumption is going to be central.”

Meanwhile, other companies are starting to increase staff as sales stabilize. General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” program.

The administration’s plan, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles.

More Sales

Cars and light trucks sold at a 14.1 million annual pace last month, up 25 percent from July, industry figures this week showed. It was the biggest gain since October 2001, when automakers including GM introduced zero-percent financing to boost sales following the terrorist attacks on New York and Washington.

The U.S. recession “is bottoming out” and the economy is poised for “a slow return,” Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings “positively” this year.

The Standard & Poor’s 500 Index yesterday snapped a four- day losing streak as sales at chain stores from Costco Wholesale Corp. to Gap Inc. last month topped analysts’ estimates. The S&P 500 has climbed almost 50 percent since reaching a 12-year low on March 9 as evidence mounted the economic slump was nearing an end.

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